Utahns Get Low-cost, Reliable Electric Power. What is Wrong with That?

Utah is doing just fine with monopoly electric service, says a state legislator who oversees the Utah Public Utilities Commission. The legislator, Carl Albrecht, was responding to an op-ed appearing in the Deseret News the week earlier by Ethan Dursteler and me in which we encouraged Utahns to consider retail electric competition.

Albrecht is right that Utah does pretty well by the usual metric of price. He noted:

[W]e have a pretty good situation in Utah. Residential rates that rank 13th lowest in the country, commercial rates that are eighth lowest. These low rates are a major contributing factor to Utah attracting businesses and driving the No. 1 economy in the country. Let’s not fix what is not broken.

Those who would tamper with this natural monopoly would tamper with a model that has safely produced highly reliable electric service at prices well below the market in Utah for decades. If they persist, they should be prepared to explain exactly how they would prevent disasters similar to 2000-2001. How can we guarantee the same disaster would not occur again?

The spectre of “scary California failure” still hangs over discussions of retail electric competition, but only in states that remain regulated. No one in Texas or Pennsylvania or Maryland or New York worries about that admittedly quite spectacular failure. Even in states like Michigan, where the utilities constantly seek to squelch the small amount of competition allowed, nobody worries about a California-style failure.

The spectre of California is now well understood and easily avoided.

“Don’t fix what is not broken” is good advice. Utah is a hard case for proponents of retail electric competition because to the people in charge and to many of their customers, everything is fine.

Yes, as Albrecht said, the electric industry evolved into a natural monopoly for good reasons. But technology has changed and the one-time overwhelming benefits from economies of scale and scope no longer dominate. The costs of a system that hampers innovation are greater now than they once were. Time to rethink that century-old state policy decision.

The point we emphasize in our op-ed was that any one-size-fits-all policy is not going to properly respect that diversity of Utah citizens. Some Utahns are angry that Rocky Mountain Power (the only major company allowed to sell retail electric power for most of the state) continues to rely heavily on coal. Other Utahns are just fine with reliance on coal, so long as the company complies with environmental regulation and rates are kept low.

As several states show, it is possible to let consumers choose their own supplier. In our view, there is no longer good reason for the state of Utah to force the views of either group on those who disagree.

One thought on “Utahns Get Low-cost, Reliable Electric Power. What is Wrong with That?

  1. What’s wrong is in my response to the “very timely and valuable “McKinsey Quarterly April 2017 article “The global forces inspiring a new narrative of progress.” That article has 9 forces organized in three groups:

    1) Global growth shifts
    2) Accelerating industry disruption
    3) A new societal deal

    In that regard, please consider the tweet Jose A Vanderhorst S @gmh_upsa Replying to @gmh_upsa @RogerLMartin and 5 others In TC1 latest tweet http://bit.ly/TWOG055 headwinds trends strategy of terrain is dead. Long live tailwinds trends strategy of trajectory.

    That tweet has four images (with hashtags that are meaningful ) with the titles (the last three respond each of the above mentioned group of forces):

    1) Synthetic response to “The global forces inspiring a new narrative of progress”
    2) Forces of a new narrative of progress: #TheWealthOfGlobalization
    3) Forces of a new narrative of progress: Influence of the #ComputingBigShift
    4) Forces of a new narrative of progress: Create the #SystemicCivilization

    The insight is that problems induce blind spot towards headwinds trends on both monopoly and “retail competition” under anti-systemic deregulation (which for Utah with cheap coal is most probably worst), which opportunities do not on tailwind trends in a world under the Computing Big Shift. There are 20 annotations.in the first image. Annotation 1 and 2 for each narrative and all 18 forces have annotation 3 to 20 with the odd numbers to McKinsey’s narrative, Next is what annotations 13 on force ” Ecosystem revolution” and 14 on “Ecosystem revolution with systemic deregulation” say:

    13. “’Any-to-any’ ecosystems, such as those of Uber and Airbnb, have emerged most recently. These companies also operate at the center of platforms, but they are distinctly asset-light.”

    14. Adding systemic deregulation to the name of the force, is meant to enable the #BrightGlobalization, for example, in a sector like energy, which according to the “the empirics of strategy,” is in the “weakest (economic profit) EP performers,” of the fifth quintile That’s opposite of the elite of the strongest EP performers, of the first quintile. While the former signals being in the #DarkGlobalization, the latter signals being in the #BrightGlobalization. This is critical with respect to annotation 8, in order to open great “any-to-any” ecosystems opportunities to accelerate the near zero-carbon EP performance with long run effective talent capital intensive potential.

    Post data: TC1 has new tweets updates. .

Comments are closed.